Minimum Efficient Scale MES

Posted in Operations and Supply Chain Terms, Total Reads: 3347

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Definition: Minimum Efficient Scale MES

Minimum Efficient Scale (MES) refers to the minimum production quantity at which an organization is able to achieve full economies of scales considering its operating costs; along with minimization of long run average costs (LRAC).

MES is generally defined as the point of intersection of Average Total Cost Curve (ATC) and the marginal cost curve (MC). It can be a single point where the U-shaped LRAC reaches its minimum (figure A) or it could be a range of outputs determined by the points of intersection of several short run quantity of output and MC (figure B). In this way MES tries to nullify the dis-economies of scale by carefully avoiding the overproduction.

MES also depends upon the size of the organization and helps the manufacturers in determining the appropriate size of the plant in accordance with the desired output level (as shown in the figure B above).